Niagara Mohawk Dug Its Own Financial Hole

Published: October 11, 1995

To the Editor:

Re "New York State Utility Seeks Sweeping Changes" (Business Day, Oct. 7): Niagara Mohawk Power Corporation's financial troubles date back to the 1970's, when it refused to recognize that consumer demand for electricity might decrease. Instead, under oath before the Atomic Energy Commission in 1973, Niagara Mohawk witnesses declared that the demand for electricity was inelastic -- price would not affect demand. Ecology Action of Oswego, the citizen interveners with which I was active, provided demand projections that considered price and that have proved to be accurate.

Company lawyers opposed considering energy conservation and renewable sources of energy. Ecology Action went to the United States Court of Appeals for the Second Circuit, arguing that these alternatives should be considered under the National Environmental Policy Act.

Before oral argument was held, electric prices skyrocketed because of the 1973 Arab oil embargo. President Nixon declared energy conservation a national objective, and the Atomic Energy commissioners overturned their own appeal board and granted our request.

Ecology Action's requested decision in the case was modest: Niagara Mohawk should wait a few years to see if demand materialized before deciding it needed a large plant. Niagara Mohawk refused, and even after the hearing was reopened in 1974 to show electric demand was decreasing, it got its construction permit from the A.E.C. The plant, Nine Mile Two, which was to cost less than $400 million, ended costing $7 billion.

Now Niagara Mohawk wants to dump this plant on the state -- a plant that was plagued with construction problems and almost had a serious accident in 1992. And the utility, using eminent domain, wants to take over the smaller plants built by independent power producers.

Where is the accountability by utility executives and stockholders? RUTH CAPLAN Washington, Oct. 8, 1995